Historically, good enterprise risk management has meant a lot of research, careful analysis, careful planning, and flawless execution, and it's wise to keep a close eye on business optimization and continuous improvement. However, the situation is different now.

In today's seemingly endless era of digital disruption, the pace of change is rapidly accelerating, often exponential rather than linear. New competitors across industries have begun to create and capture new sources of value with powerful computers, machine learning, new ways to connect buyers and suppliers, and other emerging technologies that are reshaping the industry landscape. Many brands that are more cautious, or slow to make a move, are at significantly greater risk of becoming out of touch with the times – or even killing themselves.

Rishad Tobakwala, former Chief Digital Officer of Publicis Groupe and author of "Restoring the Soul of Business," argues that over the past three decades, we've experienced three "connected eras" that have changed the way we connect and do business – from e-commerce to smart devices to 5G, VR, cloud technology and AI. We have barely begun to experience the transformative impact of generative AI.

We now live in a world of choices, avenues, and information, where friction in the process of making a purchase (the barriers that make a customer's buying journey slow, complex, or expensive) is decreasing or even disappearing. Companies that used to survive on service-only products no longer have that luxury – as evidenced by the disruption of the traditional taxi business by companies like Uber, Lyft and Grab. "Just enough" isn't enough. In the face of such far-reaching change, simply offering a slightly better product than before, a strategy that I have heard others call "infinite gradualism"—is more likely to fail.

In the face of accelerating change, it may feel safe to continue doing what we've been doing just a little better, but it's often the riskiest path we choose.

The (new) dilemma of the innovator

It's not new for incumbents to underestimate the risks posed by disruptive technologies and rebellious competitors. Clayton Christensen first pointed this out in his classic book "The Innovator's Dilemma" in 1997. As the pace of change accelerates and the change intensifies, the dilemma for innovators today becomes more intractable, and the consequences of failing to address it are even more severe.

While there is evidence that most transformations have ended in failure – McKinsey gives a 10% ratio – most executives are aware of the difficulties facing their companies. A McKinsey study in 0 found that more than 0% of executives said innovation was one of their organization's top three priorities, but less than 0% were satisfied with the company's performance.

AlixPartners' 2024-year Disruptive Index study found that:

65% of the CEOs surveyed said their company is facing significant disruption

56% of CEOs predict major disruption next year

61% of CEOs say their organizations are not adapting fast enough to stay ahead of disruption

78% of CEOs believe that the disruptive forces to prioritize are increasingly difficult to grasp

At the heart of this new innovator's dilemma is often the awareness but not the courage to act.

The mantra of conservative transformation

If we choose slow and steady innovation and can't keep up with the pace of disruption, the gap between the market demand and the products or services we offer will widen. Once the gap widens, it is often impossible to catch up with competitors who aim higher, act faster, and are more courageous.

我長達四十年的職業生涯里一大半都在零售業擔任高管、諮詢顧問和戰略顧問。現在在零售行業，這種現象最為明顯。舉例來說，曾經佔主導地位的百貨商場，市場份額已經被低價零售商（TJMaxx、HomeGoods和Ross Stores等）、美容專業品牌（Ulta、絲芙蘭）、亞馬遜等所謂的商場外競爭者奪走，而超快時尚帶來的威脅還在不斷增加。

While this transformation has been going on for more than 20 years, Macy's, JCPenney, Nordstrom and other retailer chains have been largely undergoing a conservative transformation, maintaining the status quo of brick-and-mortar stores that were primarily shopping malls, often going out of their way to advertise a variety of new measures, closing hundreds of stores, and making several rounds of cost cuts.

These conservative choices not only cannot prevent the decline in market share, but also the value transfer to rebel competitors is also obvious. While Ulta only sells beauty products — about 20% of revenue in most department stores — at the time of writing, Ulta is already more market capitalized than the top five department stores in North America combined. Shares of TJX (which includes TJMaxx, Marshall's, HomeGoods and other low-priced concept brands) have doubled in the past five years, while major department stores have seen their share prices fall sharply. Both Ulta and TJX are willing to redefine the value proposition of traditional department stores, focusing on a narrower target customer base and products, and moving away from the traditional notion that such products must be sold in hypermarkets in regional shopping centers.

Maintaining the status quo is the most dangerous strategy

I always ask my clients, "The world has changed so much, why have you changed so little?" Their responses are often complex, but mostly because they struggle to confront their fears and fail to recognize the high risks associated with a reluctance to take bold action. Humans are a species that is not good at understanding their own fears.

Going back to the retail industry, it's easy to see that Bed, Bath & Beyond's, Blockbuster's, and Borders collapsed mainly because they failed to recognise that maintaining the status quo was the most dangerous strategy. These retailers used to be dominant. There are many retailers who have failed to adapt to the new era and are now facing difficulties, and counting.

We must fundamentally rethink our relationship with risk. The potentially high costs of inaction need to be seen and acknowledged, and those costs should be quantified more fully. We must understand where the fear that keeps us at a standstill comes from. We must embrace the beauty of imperfection and accept Seth Godin's reminder that "if failure is not an option, then neither is success." ”

We must also take steps to accelerate progress in an increasingly volatile and uncertain world. Foster a culture of experimentation and find ways to "narrow change" – that is, break down complex, seemingly unbearable practices into manageable sequences. This allows us to make adjustments at each point to decide whether to stop, reassess, pivot, or invest more.

If we accept the idea that prudence is often the riskiest strategy, we see that in the face of ever-faster disruption, the only option that can succeed is to strive to deliver greater value to customers, act faster and bolder.

This doesn't mean reckless or endless large-scale projects, nor does it necessarily fit the popular slogan in Silicon Valley, "move fast, break the mold." As Graham Greene famously said, "Destruction is a form of creation." "We often need to break through the old and make something new and powerful. However, as long as we can provide enough value to our customers, moving quickly and fixing things is also valuable. You may have different opinions, but if I were you, I would choose to hurry up and act.

Steve Dennis | wen

Steve Dennis is a strategic advisor, keynote speaker, podcaster, and author of "Leaders Leap: Transforming Your Company at the Speed of Disruption" and "Remarkable Retail." Steve is the President of SageBerry Consulting, Inc., where he advises dozens of brands on growth strategies. Prior to founding the company, he served as Chief Strategy Officer and Senior Vice President of Multichannel Marketing at Nieman Marcus Group. He holds an MBA from Harvard Business School and a BA in Economics from Tufts University, and serves on several boards of directors for both for-profit and non-profit.

Shuoma | Translated by Zhou Qiang | Redaction

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